Returning the Money You Earned
As land, air, resources, and the environment are inherited [from nature], its rents should be treated communally. Labor, by contrast, is earned — whether from your work as an employee, from your innovations, or from your business operations.
Not only is it unfair for your efforts to be taxed, it’s also economically unwise. Taxing your labor discourages you from working harder, and taxing corporate income discourages business activity and investment. Burdening people’s efforts with taxes makes the economic system unsustainable by sapping its energy, while it’s forced to support an aging population and absorb external shocks.The New Physiocratic system returns these tax revenues to where they belong: you, the labor force, and the business organizations who produced this wealth in the first place.
While classical Georgist theory advocates eliminating corporate and personal income taxation altogether, the New Physiocrats advocate a different approach; taking into account the realities of modern societies and economies. The platform of the New Physiocrats returns the fruits of your labor through the National Income Supplement (NIS). After collecting income taxes, the NIS pays them back as a cash transfer to workers; where the average income earner receives the full amount.
Efforts at corporate taxation are often futile, as the capital and income which are taxed are very mobile, and can quickly flee burdensome taxes and regulatory environments. Often companies can import goods and services to where the demand is, allowing them to operate from anywhere in the world while avoiding or minimizing tariffs. Corporate income tax makes for a poor source of revenue, and is better used to incentivize particular behaviors and steer a country’s limited resources toward desired activities and goals. Taxes on retail service-sector businesses are harder to evade, as shops cannot be moved abroad, unlike factories and offices.
However, added costs for retail outlets can be passed on to consumers, and must be applied carefully to avoid cost increases on basic needs, such as food. Rates must be very low, and revenue raised from corporate taxation must be entirely returned to businesses; and done so in a way that steers nations’ resources toward its goals of providing affordable essentials for the entire population.Personal income tax must be simplified, flattened, remove deductions, and collected without the need to file tax declarations. The costs of its administration must be kept to a bare minimum, and should be implemented with the help of e-governance (as in the Estonian model). Tax brackets must be linked to national income percentiles rather than exact values, to avoid bracket creep.
Relying on income taxation to fund general government revenues is dangerous, especially in countries with aging populations. The shrinking labor force in the private sector has to sustain a growing segment of the population in retirement, the disabled, the unemployed, and the underemployed. It is an increasingly heavy burden on the continuously shrinking labor force, which sees no end in sight to the tax increases. Meanwhile, the retired and the disadvantaged are left at risk, not knowing when their economic support base might topple under its own weight.
All corporate taxes collected must be distributed directly back to businesses. Likewise, all personal income taxes collected must then be divided and distributed back to the labor force as part of an income supplement program (to be discussed in the following sections). The New Physiocrats refer to such a benefit as the National Income Supplement. This has several advantages over traditional welfare schemes to reduce poverty:
• It is the most direct and certain means of achieving income redistribution, which is often a goal of government regardless
• It achieves redistribution with the most minimal possible tax burden on all income earners
• All workers see an increase in their income when rising productivity rates and automation benefit select groups in the workforce; it promotes harmony across socioeconomic classes, as a portion of all incomes would be put into the NIS pool, then paid out
• Workers from every income bracket would cheer for income growth in other income brackets, as they would also benefit from their growth
• If the labor force uses the income supplement to move into lower paying roles, the income supplement amount lowers automatically (as there will be a smaller total national contribution); thereby disincentivizing that sort of negative behavior
• As it is not a defined benefit payment program, it ensures that the program never runs a deficit
• The money goes directly to workers, rather than through opaque, wasteful, government programs
• Citizens experience the effects economic outcomes immediately via direct deposits in their bank accounts
Instead of trying to affect living standards (and income distribution) through complicated, often wasteful schemes, along with minimum wage laws and unions, this method provides the most efficient and direct way of achieving the same desired effect.
The National Income Supplement would replace the minimum wage. At the same time, it’s a system that boosts incomes on all levels; lower tax rates on the top, and steeply negative tax rates on the bottom. This system provides powerful incentives to enter the labor force, and allows each income bracket to share the success of the others, promoting harmony between the classes. It allows all people to immediately benefit from the country’s economic success immediately, visible in their bank accounts, rather than waiting indefinitely for policies to bear fruit to them directly.